Final answer:
The Direct materials purchase-price variance is the difference between the actual and standard unit price of the direct material, times the actual quantity purchased, and is a key aspect of managing variable costs.
Step-by-step explanation:
The difference between the actual and standard unit price of the direct material multiplied by the actual quantity of the material purchased is defined as the Direct materials purchase-price variance. This variance measures the difference in what the company actually paid for the material versus what it should have paid according to the standard cost. Understanding this variance helps businesses control costs and manage their variable costs, including direct materials, which tend to vary with production output.
Variable costs like labor and raw materials are crucial for production activities and are directly affected by output levels. The law of demand also plays a significant role as it dictates that an increase in the price of a good or service usually leads to a decrease in the quantity demanded. Therefore, companies must keep an eye on the purchase prices of their direct materials to maintain cost efficiencies.